Resident funds entering the market: How far has it gone?

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Currently, discussions about residents’ deposits “moving” into the A-share market continue to heat up. As the market strengthens, the ChiNext Index and all-A-share index have successively hit historical highs, with single-day trading volume of the market approaching 4 trillion yuan at one point. How much resident capital has actually flowed in? At which stage is the current market?

The latest report from Guosen Securities points out that the incremental source in this round of the market is precisely residents’ funds that had been deposited in savings and bank wealth management over the past two years. As the low interest rate environment compresses risk-free returns and equity market profitability continues to strengthen, residents’ funds are accelerating their shift from the savings side to the capital markets. However, from a fund structure and sentiment evolution perspective, the current phase is closer to the "mid-to-late-stage diffusion phase" rather than entering the 2015-style "nationwide euphoria".

Compared to the 2019–2021 structural bull market, the process of residents directly entering the market in this round is nearly 80% complete, while entry via public mutual funds still has some room to grow. Overall, current fund sentiment is approximately 60%–70% of the central level during the 2019–2021 bull market.

But if compared to the liquidity-driven bull market of 2013–2015, most indicators are still only in the 30%–40% range, meaning there is still room for further spread of resident funds and for market sentiment to continue heating up.

35 trillion yuan in deposits is the ammunition for this round of the market

From 2022 to 2023, household deposits increased by more than 35 trillion yuan over two years, with a large amount of funds deposited in savings and risk-free or ultra-low-risk assets such as bank wealth management. At that time, the equity market was persistently sluggish, risk appetite was contracted, and residents had no incentive to bear greater volatility.

A true turning point was brought about by the continuing compression of risk-free returns in a low interest rate environment. On one hand, returns from savings and wealth management kept declining, while on the other, the equity market has steadily warmed up since the second half of 2024, causing residents’ expectations for asset allocation returns to reverse, and funds previously deposited in the banking system began to loosen.

The most intuitive manifestation of this change is the continuously widening "scissor difference" in the year-on-year growth rates between non-bank deposits and resident deposits. Since the end of 2025, there has been a clear divergence: as of April 2026, the year-on-year growth rate of non-bank deposits has risen to 31%, while that of personal deposits is only 8%. This means resident funds are accelerating their flow from the banking system to capital market channels such as brokerages and funds.

Capital relay: The rotation logic of three types of channels

This round of residents’ capital entering the market is not an “all-at-once” rush, but instead shows a typical layered risk preference characteristic, and the evolutionary path is highly similar to the past two bull markets.

If broken down into three channels—low-risk (dividend insurance, fixed income+), medium and high risk (active equity mutual funds, ETFs), and high risk (margin financing, private equity)—in the early stage of this bull market, i.e., Q3 2024 to Q3 2025, the first to enter the market was the capital with the highest risk appetite.

During this stage, cumulative market entry via high-risk channels was about 1.4 trillion yuan, low-risk channels about 260 billion yuan, while medium and high-risk channels not only didn’t see net inflow, but experienced a net outflow of about 310 billion yuan. This is a typical early-bull-market characteristic: capital willing to leverage and chase high beta jumps in first, while risk-averse investors relying on public funds and ETFs remain on the sidelines.

But entering Q4 2025 to Q1 2026, the market begins to show obvious “diffusion into the market”. Newly added capital via high-risk channels quickly dropped to about 40 billion yuan, while medium and high-risk channel inflows surged to 460 billion yuan, making public funds once again the main channel for residents’ capital to enter the market.

This is almost identical to the capital relay logic in the mid-terms of the 2013–2015 and 2019–2021 bull markets: Early on, high-risk capital sets off the spark, with profitability effects gradually spreading to a wider group of residents, who begin to enter the market en masse via fund channels, transforming the market from a "bull market for the few" to a broader story about residents’ capital.

Sentiment has reached a stage high, but is still some distance from historical extremes

As residents’ funds continue to flow in, the heat of the A-share market is also rapidly rising.

Currently, the annualized weekly turnover rate of A-shares has reached 491%, standing at the 82nd percentile since 2005; the proportion of margin financing transactions has risen to 9.9%, at the 73rd percentile. Both indicators are at obviously high levels no matter which stage they are put in, indicating that the market’s trading activity and risk appetite are rapidly increasing, and short-term sentiment is clearly heating up.

The same is true in terms of valuations. Currently, the overall A-share PE ratio is about 24.2 times, the risk premium has dropped to 2.4%, both at high levels within this round of the bull market—that is, since the start of the rally on September 24, 2024. In other words, within the context of this round, market sentiment and valuation have actually approached stage highs.

However, if we extend the time frame and compare with the peaks of several previous bull markets, the current indicators still haven’t reached historical extremes. Whether it’s degree of valuation expansion, activity of leveraged capital, or overall risk appetite, we’re still some way off from the “nationwide euphoria” stages of past bull cycles.

This means that, at present, the market is more like a “high point within this round”, but from a cross-cycle perspective, it’s hard to define as an absolute historical top.

Divergence in position under two sets of coordinates

If measured against the 2019–2021 bull market, the progress of residents directly buying stocks is already close to 80%, and considering the previous round lasted about two years, the current round is actually in the mid-to-late stage.

But the pace of market entry via public mutual funds is clearly lagging. Combining indicators such as fund subscriptions, trading activity, and risk appetite, current overall sentiment remains roughly at the 60%–70% level of the 2019–2021 cycle, indicating that capital diffusion is not yet finished.

If we switch to the "nationwide leveraged bull" coordinate system of 2013–2015, things are different. Aside from indirect market entry via public mutual funds, most of the indicators for resident capital and sentiment in this round are only at 30%–40% of those highs, still well below the extreme stage of rampant off-balance-sheet financing and nationwide leverage in 2015.

How far the current bull market ultimately goes depends to a large extent on what kind of rally it eventually becomes—is it a "institutional-led bull market" like 2019–2021, or will it further evolve into a "nationwide sentiment-driven bull market" like 2015?

Risk Warning and DisclaimerThe market involves risk, and investment should be made with caution. This article does not constitute personal investment advice, nor does it take into account the individual investment objectives, financial circumstances, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their specific circumstances. Investments made accordingly are at your own risk. ```